Cairn-Vedanta deal: Its now come down to rank and file

PETRONAS, Cairn's four year old partner has called it quits. Quite abruptly, one may say! And this may just be the beginning for Cairn India that has had a successful run till now. There is news trickling in, that the delay in the Cairn-Vedanta transaction has put the company's operations in a limbo, forcing senior and mid level staff to move on to greener pastures.

The top management of Cairn India has been busy fighting an internal crisis for the past few weeks. First, to stall the sudden exit of their Malaysian partner, who at one point was willing to buy the Cairn stock at a premium, while on the other it was the raging internal battle as there was a steady rise in the rank and files of people quitting, primarily for foreign jobs. A senior company official said that most of the resignations have come in the mid-to senior category who have opted for jobs in Dubai and Singapore. And this may be just the beginning as rival Indian oil firms too are on the prowl and poaching is imminent, he said. The exit of some of the key people will be a setback as Cairn had spent a considerable amount of time and investment in training personnel in specialized technology and skills.

Having worked in a successful oil firm that has discoveries to its credit is always a brand in itself. Cairn and RIL has been the poster boys for private investments in India's oil sector.

The main reason for the "frustration" within the company is because of the uncertainty that has followed Cairn Plc's proposal to sell majority of its stake to Vedanta. On the one hand, production from its fields which could have been ramped up, have remained unchanged as the government has been unable to make up its mind. On the other, Cairn's partner in the Rajasthan fields ONGC has done precious little to push for speedy decisions.

The market has given thumbs down to the deal as it is still unclear on what conditions it would come through. Although the share price of Cairn India remains static when compared to Aug 16, 2010, when the deal was announced, it has seen some dramatic lows as the contours of the approval process over the last nine months unfolded.

The fate of the Cairn Vedanta deal that has been mired in a political turmoil since last August is still uncertain. The companies have taken a deadline extension for one month i.e. up to May 22, but there is no clarity as to whether there would a decision by then. The cabinet had referred the case to a special group of ministers to debate and takes a call on the concerns raised by Cairn's Indian partner ONGC. The Malaysian state-owned oil major that had first bought into Cairn India during the IPO, investing twice after that, had a 14.9% stake. Last reported, the Malaysian partner had indicated that it would stay put even after the change of control and ownership post the Cairn-Vedanta deal. So what really led to the change of heart?